US-Japan Business Conference

Speech by Ambassador Mike Mansfield to
U.S. - JAPAN BUSINESS CONFERENCE
July 15, 1986 Tokyo
Chairman Hasegawa, Chairman Morgan, and other
distinguished members of the U.S.-Japan Business Council, it
is a great pleasure to speak to the 23rd U.S.-Japan Business
Conference.
When Mr. Hasegawa asked me to speak, he said he sensed
that, and I quote, "\Ve have come to a critical and volatile
period between now and the U.S elections in November", end
quote. I agree that time is of the essence in dealing with
the economic frictions which threaten to erode this most
important of all bilateral relationships. At the same time,
I also see this as an opportune time to solve the problems
before us, instead of pointing fingers and blaming each
other for problems for which both sides bear
responsibility.
No one who understands the size of the U.S.-Japan·
economic relationship could fail to grasp its importance.
We had $95 billion in two-way trade last year. The U.S. is
by far the largest market for Japan, taking over 38 percent
of Japan's exports in 1985. Japan is the largest market for
U.S. exports except for Canada. Many jobs in both our
countries depend on exports to the other.
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
Our economies are interdependent not only in the area of
merchandise trade. Japan had a net long-term capital
outflow of $64.5 billion in 1985. Of that over half, or
$33.2 billion, was invested in the United States. A large
portion of that investment was in U.S. treasury securities.
This supply of capital from abroad assisted the U.S.
government in financing its large budget deficit, which in
turn has helped ease pressure on U.S. interest rates.
Japan had a direct investment position in the u.s. of
$14.8 billion at the end of 1984, up from $11.3 billion the
year before and approximately $20 billion at the end of
1985. It is estimated that this growth will continue at a
rate of 14.2% to the year 2000. This direct investment
creates jobs and is most welcome. All signs are that it
will continue to grow. ~1e U.S. direct investment position
in Japan is also substantial, standing at $8.4 billion at
the end of 1984, for the rest of East Asia about $20
billion; roughly $30 billion and of $233 bil·lion the u •. s.
has in direct investments world wide.
It is the trade imbalance, however, which gets the most
attention in discussing our economic relationship. Japan's
large trade surplus with the United States, nearly $50
billion last year, is simply too large to ignore. Japan's
global trade surplus, $61.6 billion in JFY 1985 - $12
billion above their $50 billion surplus with the U.S. -is a
burden on the world trade system, and if it continues to
- 2 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
grow it threatens a breakdown in that system. At the same
time, the large global trade deficit in the U.S., nearly
$150 billion last year, illustrates all too clearly that our
trade problem in America is not just a bilateral problem
with Japan, but is a global problem. For example, nobody
seems to mention our $22 billion deficit with Canada, our
$13 billion deficit with Taiwan, our $6.2 billion deficit
with Hong Kong, our $19 billion deficit with Latin America,
our $26.4 billion deficit with Western Europe - in 1981 we
had a $20 billion surplus with that area - and so on
elsewhere. Incidentally in 1981 our deficit with Japan
amounted to $13 billion.
I am well aware that as the congressional elections in
the U.S. approach, the pressures to take short-term measures
to deal with our trade deficit will become even more intense
than they now are. The temptation to close our markets in
the name of reciprocity is strong, but we must realize that
protectionism is not a real solution. I am ~ell aware, - also, that the one person who has consistently prevented the
enactment of protectionist legislation is President Reagan
but, to repeat, the pressures are rising.
The U.S. administration opposes protectionist
legislation, for the simple reason that the international
trade system depends on open markets. The solution to our
trade problem is more trade, not less trade. We all must
open markets, not close them.
- 3 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
It is clear that trade wars would hurt all of us. All
the work we have done in rebuilding the world economy and
democracy in the wake of World War II would be destroyed by
protectionism. It is the open international trade system
which has led to world recovery and the tremendous growth we
have seen in the last forty years.
We in the U.S. must not deceive ourselves into believing
that only other nations would be hurt by protectionism. The
U.S. would be damaged as well. Need I remind you that the
U.S. is the world's largest exporter. On a global basis,
the U.S. exported 25 percent more than did Japan last year.
The reason we have such a large trade deficit is that we are
by far the world's largest importer as well. Closing of
foreign markets in reaction to protectionist trade
legislation in the U.S. would result in the loss of many
American jobs, jobs which depend on the existence of foreign
export markets.
Japan, however, would be hurt much more by a loss jn
export markets than would the U.S. In fact, Japan has been
almost totally dependent on exports for its real economic
growth. \fuen exports dropped in the first quarter of this
year due to the strong yen, Japan's domestic economy was not
strong enough to pick up the slack, and consequently Japan
was left with a real decline in GNP of 2.1 percent at an
annual rate.
- 4 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
This over-reliance on exports is the root of Japan's
trade problems with the rest of the world. Japan is now the
world's second largest economy, but rather than acting as a
contributor to world growth by being a net importer, Japan
has been benefiting from world growth as a net exporter.
To their credit, it appears that Japan's leadership now
recognizes Japan is at a crossroads, and that Japan must
deal with its chronic trade surplus in order to take its
rightful place as a leading economic power. In accepting
the report of his private advisory body known as the Maekawa
Commission, Prime Minister Nakasone committed Japan to the
task of reducing its large trade and current account
surpluses to levels consistent with international harmony.
How to move to a more balanced trading relationship is
of course the key question. As I see it, three things must
happen if we are to succeed in this endeavor: first, more
open access to the Japanese market; second, a stable and
strong yen over the long-term; and third, s~ructural
adjustment in the Japanese economy to move away from
dependence on exports to domestic-led growth.
Much progress has been made in opening Japan's markets
to foreign competition, but much more remains to be done in
many areas. There is no excuse for protecting any sector of
Japan's market from outside competition when Japan runs a
trade surplus of over $61 billion. Unfortunately there are
still too many exceptions to Japan's stated policy of
- 5 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
"markets free in principle, with import restrictions only as
exceptions." To too many foreign businessmen it sometimes
looks as if the exceptions are the rule.
Agriculture is perhaps the clearest example of protected
markets in Japan. The Japanese consumer pays a high price
for food so that farmers in noncompetitive sectors can enjoy
a standard of living well above that of average Japanese
working people. Without the protectionist quotas, tariffs,
and import cartels on agricultural products, foreign
competition would bring down the cost of food considerably.
By the way, the U.S. in May, '85 - for the first time on
record- imported more farm goods than it exported •.
There are many other areas where free competition is not
presently allowed. A diverse range of products from soda
ash and tobacco to wine and chocolate still suffer from high
import duties and distribution restrictions which
effectively limit competition, and keep prices in Japan
high. Again, it is the Japanese consumer who suffers and
pays the price.
I do not intend to list all the sectors where more
market access is needed, but I would like to mention one
area of particular concern, the Kansai International
Airport. At present foreign companies are not being allowed
to bid on this major construction project in an open
manner. When we look at the many Japanese contruction and
design companies, and other service companies, which compete
- 6 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
and operate freely in the United States, then this is simply
not acceptable. The Congress is increasingly aware of this
issue, and I urge that it be resolved before it becomes
another thorn in our relationship.
These and other market access issues must be dealt with
and solved. We all know about domestic political restraints
and vested interests which get in the way of opening markets
and granting free access and competition. Nevertheless, we
cannot accept a situation where Japanese companies enjoy
free access to other's markets, but foreign companies do not
enjoy the same access to the Japanese market.
Having said this, we must all realize that although
market access in Japan is a problem, market access alone is
not the solution to the trade imbalance. In addition to
more open markets, there must also be over the long term a
strong and stable yen relative to the dollar. Much of the
U.S. global trade deficit came about as a result of the
appreciation of the dollar against major int.ernational - currencies in the period from 1980 to 1985. This situation
has turned around considerably since the G-5 meeting in New
York last September 22, when our finance ministers agreed to
cooperative measures to bring down the value of the dollar
and strengthen the yen. The results have been good -- the
yen went from 242 the day before the meeting to the 160
range today.
- 7 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
If the dollar is to stay at current levels in the long
run, we in the U.S. are going to have to deal with our
budget deficit. As long as the budget deficit sucks in
foreign capital by keeping interest rates high, then upward
pressure on the dollar will continue. Even though the
Supreme Court recently ruled parts of the Gramm - Rudman law
unconstitutional, we can only hope that the Congess still
realizes the urgency of tackling the budget problem. No one
else can do this for us. I do not know too much about
Gramm - Rudman but, if it forces Congress to face up to the
deficit and do something about it, it will have achieved a
worthwhile and necessary objective.
To move to balanced trade, in addition to market opening
and a strong yen, there must also be structural adjustment
in the Japanese economy, adjustment to an economy led by
domestic growth rather than export. growth.
Such an adjustment to domestic-led growth is necessary
if Japan is to meet its global responsibilit~es as an - economic superpower. The developing nations particularly
need export markets if they are to have the opportunity for
their own economic progress. The United States is and has
been for some time the major importing nation in the world.
The availability of the U.S. market has been a major factor
in the tremendous economic growth the globe has seen since
World War II. Japan is now the second largest economy in
the world, and in many ways it's the wealthiest nation of
- 8 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
the world. It is time for Japan to shoulder its
responsibility for growth in the rest of the global
economies, economies which contributed so much to Japan's
own economic recovery.
More domestic-led growth is also needed for Japan's own
economic survival. The Japanese economy has been overly
dependent on exporting, and thus very vulnerable. As I
mentioned earlier, when the quantity of exports dropped due
to the strong yen, Japan was left with insufficient domestic
growth, and suffered from a real decline in GNP of 2.1
percent at an annual rate in the first quarter, the first
decline in GNP in eleven years.
I hope Japan as soon as possible will get own with
implementation of the recommendations contained in the
excellent report of the Maekawa Commission, recommendations
which if enacted should promote domestic growth in Japan,
and also promote imports from other nations. The time has
clearly come for the ideas contained in the.Maekawa R~ort
-- ideas such as major income tax cuts, tax incentives for
housing investment, taking a hard look at the tax free
savings system, growth in wages, deregulation of the
economy, expanded infrastructure investment, financial
liberalization, free market access, internationalization of
agricult ural policy, and the like.
Fundamental changes in the structure of the Japanese
economy obviously will not come without a certain amount of
- 9 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
. ~
domestic pain in some sectors of the economy. However, the
resounding victory of the Liberal Democratic Party in the
recent election shows that the Japanese people accept the
policy of shifting Japan's economy away from one dependent
on exports to one led by domestic growth. The mandate given
to go forward with these changes shows that the Japanese
people recognize their new responsibilities as a super
economic power, with a major role to play in contributing to
world economic growth via a strong yen and a strong domestic
economy.
In closing, I would just like to say that time is indeed
of the essence in resolving the economic frictions between
us. Many of the trade issues we now face have festered for
too long. The time is ripe for solutions to our trade
disputes, as well as for implementation of the structural
adjustments which must take place if we are to have a
balanced and harmonious economic relationship over the long
run. - The U.S. - Japan partnership remains strong and vital.
It is much too important to both of our nations, indeed to
the entire free world, for us to allow trading problems to
constantly threaten to sour the relationship. The way to
deal with these problems is not to try to hide them, but to
face them and to solve them. We have our work cut out for
us, and we had best get on with it, so our relationship can
grow even stronger.
- 10 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana

Click tabs to swap between content that is broken into logical sections.

Copyright to this collection is held by the Maureen and Mike Mansfield Library, University of Montana-Missoula. For further information regarding use of the items in this collection, please contact Archives and Special Collections: (406) 243-2053 / library.archives@umontana.edu

For additional information about the collections held by the Archives and Special Collections at the University of Montana--Missoula, please visit the web site: http://www.lib.umt.edu/asc. To suggest a keyword or share what you might know about this item, email: library.archives@umontana.edu.

Transcript

Speech by Ambassador Mike Mansfield to
U.S. - JAPAN BUSINESS CONFERENCE
July 15, 1986 Tokyo
Chairman Hasegawa, Chairman Morgan, and other
distinguished members of the U.S.-Japan Business Council, it
is a great pleasure to speak to the 23rd U.S.-Japan Business
Conference.
When Mr. Hasegawa asked me to speak, he said he sensed
that, and I quote, "\Ve have come to a critical and volatile
period between now and the U.S elections in November", end
quote. I agree that time is of the essence in dealing with
the economic frictions which threaten to erode this most
important of all bilateral relationships. At the same time,
I also see this as an opportune time to solve the problems
before us, instead of pointing fingers and blaming each
other for problems for which both sides bear
responsibility.
No one who understands the size of the U.S.-Japan·
economic relationship could fail to grasp its importance.
We had $95 billion in two-way trade last year. The U.S. is
by far the largest market for Japan, taking over 38 percent
of Japan's exports in 1985. Japan is the largest market for
U.S. exports except for Canada. Many jobs in both our
countries depend on exports to the other.
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
Our economies are interdependent not only in the area of
merchandise trade. Japan had a net long-term capital
outflow of $64.5 billion in 1985. Of that over half, or
$33.2 billion, was invested in the United States. A large
portion of that investment was in U.S. treasury securities.
This supply of capital from abroad assisted the U.S.
government in financing its large budget deficit, which in
turn has helped ease pressure on U.S. interest rates.
Japan had a direct investment position in the u.s. of
$14.8 billion at the end of 1984, up from $11.3 billion the
year before and approximately $20 billion at the end of
1985. It is estimated that this growth will continue at a
rate of 14.2% to the year 2000. This direct investment
creates jobs and is most welcome. All signs are that it
will continue to grow. ~1e U.S. direct investment position
in Japan is also substantial, standing at $8.4 billion at
the end of 1984, for the rest of East Asia about $20
billion; roughly $30 billion and of $233 bil·lion the u •. s.
has in direct investments world wide.
It is the trade imbalance, however, which gets the most
attention in discussing our economic relationship. Japan's
large trade surplus with the United States, nearly $50
billion last year, is simply too large to ignore. Japan's
global trade surplus, $61.6 billion in JFY 1985 - $12
billion above their $50 billion surplus with the U.S. -is a
burden on the world trade system, and if it continues to
- 2 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
grow it threatens a breakdown in that system. At the same
time, the large global trade deficit in the U.S., nearly
$150 billion last year, illustrates all too clearly that our
trade problem in America is not just a bilateral problem
with Japan, but is a global problem. For example, nobody
seems to mention our $22 billion deficit with Canada, our
$13 billion deficit with Taiwan, our $6.2 billion deficit
with Hong Kong, our $19 billion deficit with Latin America,
our $26.4 billion deficit with Western Europe - in 1981 we
had a $20 billion surplus with that area - and so on
elsewhere. Incidentally in 1981 our deficit with Japan
amounted to $13 billion.
I am well aware that as the congressional elections in
the U.S. approach, the pressures to take short-term measures
to deal with our trade deficit will become even more intense
than they now are. The temptation to close our markets in
the name of reciprocity is strong, but we must realize that
protectionism is not a real solution. I am ~ell aware, - also, that the one person who has consistently prevented the
enactment of protectionist legislation is President Reagan
but, to repeat, the pressures are rising.
The U.S. administration opposes protectionist
legislation, for the simple reason that the international
trade system depends on open markets. The solution to our
trade problem is more trade, not less trade. We all must
open markets, not close them.
- 3 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
It is clear that trade wars would hurt all of us. All
the work we have done in rebuilding the world economy and
democracy in the wake of World War II would be destroyed by
protectionism. It is the open international trade system
which has led to world recovery and the tremendous growth we
have seen in the last forty years.
We in the U.S. must not deceive ourselves into believing
that only other nations would be hurt by protectionism. The
U.S. would be damaged as well. Need I remind you that the
U.S. is the world's largest exporter. On a global basis,
the U.S. exported 25 percent more than did Japan last year.
The reason we have such a large trade deficit is that we are
by far the world's largest importer as well. Closing of
foreign markets in reaction to protectionist trade
legislation in the U.S. would result in the loss of many
American jobs, jobs which depend on the existence of foreign
export markets.
Japan, however, would be hurt much more by a loss jn
export markets than would the U.S. In fact, Japan has been
almost totally dependent on exports for its real economic
growth. \fuen exports dropped in the first quarter of this
year due to the strong yen, Japan's domestic economy was not
strong enough to pick up the slack, and consequently Japan
was left with a real decline in GNP of 2.1 percent at an
annual rate.
- 4 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
This over-reliance on exports is the root of Japan's
trade problems with the rest of the world. Japan is now the
world's second largest economy, but rather than acting as a
contributor to world growth by being a net importer, Japan
has been benefiting from world growth as a net exporter.
To their credit, it appears that Japan's leadership now
recognizes Japan is at a crossroads, and that Japan must
deal with its chronic trade surplus in order to take its
rightful place as a leading economic power. In accepting
the report of his private advisory body known as the Maekawa
Commission, Prime Minister Nakasone committed Japan to the
task of reducing its large trade and current account
surpluses to levels consistent with international harmony.
How to move to a more balanced trading relationship is
of course the key question. As I see it, three things must
happen if we are to succeed in this endeavor: first, more
open access to the Japanese market; second, a stable and
strong yen over the long-term; and third, s~ructural
adjustment in the Japanese economy to move away from
dependence on exports to domestic-led growth.
Much progress has been made in opening Japan's markets
to foreign competition, but much more remains to be done in
many areas. There is no excuse for protecting any sector of
Japan's market from outside competition when Japan runs a
trade surplus of over $61 billion. Unfortunately there are
still too many exceptions to Japan's stated policy of
- 5 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
"markets free in principle, with import restrictions only as
exceptions." To too many foreign businessmen it sometimes
looks as if the exceptions are the rule.
Agriculture is perhaps the clearest example of protected
markets in Japan. The Japanese consumer pays a high price
for food so that farmers in noncompetitive sectors can enjoy
a standard of living well above that of average Japanese
working people. Without the protectionist quotas, tariffs,
and import cartels on agricultural products, foreign
competition would bring down the cost of food considerably.
By the way, the U.S. in May, '85 - for the first time on
record- imported more farm goods than it exported •.
There are many other areas where free competition is not
presently allowed. A diverse range of products from soda
ash and tobacco to wine and chocolate still suffer from high
import duties and distribution restrictions which
effectively limit competition, and keep prices in Japan
high. Again, it is the Japanese consumer who suffers and
pays the price.
I do not intend to list all the sectors where more
market access is needed, but I would like to mention one
area of particular concern, the Kansai International
Airport. At present foreign companies are not being allowed
to bid on this major construction project in an open
manner. When we look at the many Japanese contruction and
design companies, and other service companies, which compete
- 6 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
and operate freely in the United States, then this is simply
not acceptable. The Congress is increasingly aware of this
issue, and I urge that it be resolved before it becomes
another thorn in our relationship.
These and other market access issues must be dealt with
and solved. We all know about domestic political restraints
and vested interests which get in the way of opening markets
and granting free access and competition. Nevertheless, we
cannot accept a situation where Japanese companies enjoy
free access to other's markets, but foreign companies do not
enjoy the same access to the Japanese market.
Having said this, we must all realize that although
market access in Japan is a problem, market access alone is
not the solution to the trade imbalance. In addition to
more open markets, there must also be over the long term a
strong and stable yen relative to the dollar. Much of the
U.S. global trade deficit came about as a result of the
appreciation of the dollar against major int.ernational - currencies in the period from 1980 to 1985. This situation
has turned around considerably since the G-5 meeting in New
York last September 22, when our finance ministers agreed to
cooperative measures to bring down the value of the dollar
and strengthen the yen. The results have been good -- the
yen went from 242 the day before the meeting to the 160
range today.
- 7 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
If the dollar is to stay at current levels in the long
run, we in the U.S. are going to have to deal with our
budget deficit. As long as the budget deficit sucks in
foreign capital by keeping interest rates high, then upward
pressure on the dollar will continue. Even though the
Supreme Court recently ruled parts of the Gramm - Rudman law
unconstitutional, we can only hope that the Congess still
realizes the urgency of tackling the budget problem. No one
else can do this for us. I do not know too much about
Gramm - Rudman but, if it forces Congress to face up to the
deficit and do something about it, it will have achieved a
worthwhile and necessary objective.
To move to balanced trade, in addition to market opening
and a strong yen, there must also be structural adjustment
in the Japanese economy, adjustment to an economy led by
domestic growth rather than export. growth.
Such an adjustment to domestic-led growth is necessary
if Japan is to meet its global responsibilit~es as an - economic superpower. The developing nations particularly
need export markets if they are to have the opportunity for
their own economic progress. The United States is and has
been for some time the major importing nation in the world.
The availability of the U.S. market has been a major factor
in the tremendous economic growth the globe has seen since
World War II. Japan is now the second largest economy in
the world, and in many ways it's the wealthiest nation of
- 8 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
the world. It is time for Japan to shoulder its
responsibility for growth in the rest of the global
economies, economies which contributed so much to Japan's
own economic recovery.
More domestic-led growth is also needed for Japan's own
economic survival. The Japanese economy has been overly
dependent on exporting, and thus very vulnerable. As I
mentioned earlier, when the quantity of exports dropped due
to the strong yen, Japan was left with insufficient domestic
growth, and suffered from a real decline in GNP of 2.1
percent at an annual rate in the first quarter, the first
decline in GNP in eleven years.
I hope Japan as soon as possible will get own with
implementation of the recommendations contained in the
excellent report of the Maekawa Commission, recommendations
which if enacted should promote domestic growth in Japan,
and also promote imports from other nations. The time has
clearly come for the ideas contained in the.Maekawa R~ort
-- ideas such as major income tax cuts, tax incentives for
housing investment, taking a hard look at the tax free
savings system, growth in wages, deregulation of the
economy, expanded infrastructure investment, financial
liberalization, free market access, internationalization of
agricult ural policy, and the like.
Fundamental changes in the structure of the Japanese
economy obviously will not come without a certain amount of
- 9 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana
. ~
domestic pain in some sectors of the economy. However, the
resounding victory of the Liberal Democratic Party in the
recent election shows that the Japanese people accept the
policy of shifting Japan's economy away from one dependent
on exports to one led by domestic growth. The mandate given
to go forward with these changes shows that the Japanese
people recognize their new responsibilities as a super
economic power, with a major role to play in contributing to
world economic growth via a strong yen and a strong domestic
economy.
In closing, I would just like to say that time is indeed
of the essence in resolving the economic frictions between
us. Many of the trade issues we now face have festered for
too long. The time is ripe for solutions to our trade
disputes, as well as for implementation of the structural
adjustments which must take place if we are to have a
balanced and harmonious economic relationship over the long
run. - The U.S. - Japan partnership remains strong and vital.
It is much too important to both of our nations, indeed to
the entire free world, for us to allow trading problems to
constantly threaten to sour the relationship. The way to
deal with these problems is not to try to hide them, but to
face them and to solve them. We have our work cut out for
us, and we had best get on with it, so our relationship can
grow even stronger.
- 10 -
Mike Mansfield Papers, Series 32, Box 4, Folder 2, Mansfield Library, University of Montana